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from: Palm Beach Post

Phone cable plan touted as boon, feared as bias

By Kristi E. Swartz

Palm Beach Post Staff Writer

Wednesday, April 25, 2007

TALLAHASSEE — Beverly Campbell said mortgage lenders and pizza delivery guys already bypass her Pine Hills neighborhood in west Orlando.

The area is made up generally of low- to moderate-income apartments and houses, and many of the residents are immigrants, Campbell said. So if another company besides Bright House Networks of St. Petersburg comes in wanting to sell cable service, she and her neighbors don't expect to be on the top of the target customer list.

But that doesn't mean the new company should just write them off, said Campbell, a member of the Association of Community Organizations for Reform Now.

"There's already a digital divide," said Campbell, 38, a customer-service worker who looks after seven children ages 12 to 21. "But you can't deny someone service just because you think they won't be able to pay their bill."

Today, Florida legislators are expected to begin debating whether telephone giants AT&T Corp. and Verizon Communications should be able to offer cable television and related services such as broadband Internet access without having to negotiate individual agreements with each city or town. Eleven states have passed similar laws.

Cable TV companies such as Bright House, Comcast Corp. and Time Warner Cable Inc. argue that the phone companies simply are looking for permission to choose the most affluent neighborhoods in which to offer their services. But the phone companies counter that entering the cable market will mean more competition, and therefore lower prices for everyone.

"This is created by two competitors who have never competed before," said Jeff Kagan, a Marietta, Ga.-based independent telecommunications analyst. "This is going to be the biggest fight that we've ever seen in the telecommunications industry."

Local power would shift to state

Florida lawmakers are grappling with this bill for the second year in a row.

One proposal sailed through the House weeks ago. In the Senate, a somewhat similar measure, heavily bogged down in other telecom-related amendments, is scheduled for debate this week.

In general, the bills would remove any local authority from cities and counties and place it in the hands of the state. Any new video provider must offer a certain number of public, education and government channels and must not discriminate on the basis of race or income.

Perhaps the largest sticking point, and the one likely to decide the bill's fate this year, is "buildout," in which new video providers must place their cable lines so they do not deny service to lower-income or rural neighborhoods.

AT&T and Verizon are adamant that they will not avoid selling their video and Internet services in lower-income or rural neighborhoods and said they've gone to some of those areas first in cities where they've struck an agreement with the local government to be a licensed cable provider.

Bob Elek, a spokesman for Verizon, said the company already has some franchises in the University area of Tampa Bay, which includes lower-middle-class neighborhoods.

"We have our network going by and serving public housing, so we just don't think the argument, when you get down on the ground and observe what is happening, has merit," he said.

But consumer advocates contend that in states where companies now have free rein to place video service anywhere, building out beyond a large, populated or high-income area isn't happening.

"In Texas, we haven't seen really any new buildout; again, the same in New Jersey," said Amina Fazullah, an attorney for the Washington, D.C.-based U.S. Public Interest Research Group. "In Michigan, we've yet to see it; in California, we've yet to see it. It's looking pretty poor."

And in Colorado, Qwest Communications lost its fight in the legislature to get one statewide permit to sell cable, in large part because it wouldn't agree to build its fiber-optic cable everywhere.

"It's going to be as important as the telephone," Denver Mayor John Hickenlooper said. "Would we let a telephone company not build out to certain parts of the city?"

More than just a television issue

Even though millions of American consumers pay for some sort of television, it's not an essential service, like running water.

"When you stop and think about it, multichannel video is not a necessity in this world, although a lot of people are so taken with it that they spend an enormous amount of money on it," said Steve Wilkerson, president of the Tallahassee-based Florida Cable & Telecommunications Association, the cable industry group that's lobbied against changing the state's franchise laws for two years.

The argument isn't about watching more TV, consumer advocates say.

"It's important to look at it not just as cable television, but that it's bringing you broadband Internet," Fazullah said. "That's the key distinction to why it's important."

They say it would be discrimination for AT&T and others not to run a high-speed fiber-optic line through every neighborhood to give all residents access to video service.

"The debate is not over HBO," said John Wayne Smith, a lobbyist for the Florida League of Cities. "It's over a fiber-optic system that's being put in the ground. People depend on that like water, like sewer. People depend on that for information."

The outcome of the debate will be momentous, Smith said.

"Not since we made investments for a national highway system is there a more important, more contemporary type of an issue in terms of how we upgrade this type of infrastructure," he said. "If it's in front of your house, you have access to the world."

Bigger markets likely first targets

In South Florida, it's unclear where AT&T will roll out its video product - U-verse - first. The company is concentrating on the outcome of the legislation at this point, spokesman Don Sadler said.

Nationwide, U-verse is in 15 markets. AT&T takes a number of factors into account when trying to figure out where to offer it, Sadler said.

"We launch new markets first by offering service to a limited area to ensure a positive customer experience and expand availability," he said.

U-verse is available in large cities such as San Francisco, Milwaukee and Indianapolis, as well as a couple of smaller cities such as Anderson, Ind., and Danbury, Conn.

"Based on sheer economics, they are likely to roll out in the bigger markets than frankly some of the rural markets," said William Power, an analyst who follows AT&T and Verizon for R.W. Baird & Co. "I do think it's their intention to reach most if not all of their customers, but the technology may differ."

Mario Goderich could be excused for questioning that. The deputy director of the consumer services department for Miami-Dade County, Goderich said BellSouth Entertainment approached the county in 1998 about a franchise agreement, selling them on the idea that having another competitor would lower cable rates.

But there was one condition: The county had to remove its buildout requirement, which BellSouth said was a barrier to competition.

"Frankly, I felt if anyone was going to be a viable competitor, I figured it would be someone like BellSouth," Goderich said.

The county did away with the buildout requirement and gave BellSouth a countywide franchise.

Ten years later, the company serves about 5,000 homes with cable in a county that has 500,000 cable TV customers, Goderich said.

But the phone companies maintain that their ultimate goal is to reach as many people as possible.

"I haven't heard anyone from the cable market speak on this. Have they already built out?" Verizon's Elek said. "If they have, and they are in that market, then we're going to go after them. We've invested billions into this, we're going to need customers, and we're not going to be too picky where they are."